Wednesday, August 1, 2012

The Trilemma. A dilemma with three options.

It seems to me the present situation presents us with quite a clear picture of the possibilities we face. To simplify, maybe excessively, I believe we can only have two of the following: a “traditional” welfare system, the Euro or economic growth.

Let’s see. The first scenario is already before our eyes: we have the Euro, and we’ve got a traditional welfare system, whose astronomical costs caused public expenditure (in Italy) to reach something like 52% of GDP (Gross Domestic Product). But we don’t have economic growth: GDP is decreasing; the unemployment rate rose above 10% (for the first time in many years); youth unemployment stands at above 36% (but, as I will explain later, this is data to be taken with a grain of salt); small and medium size businesses are dying left and right; artisans and storekeepers are in a great deal of trouble and consumption (even the consumption of those kinds of goods that usually doesn’t decrease) is dropping significantly (fuel minus 20%, cigarettes minus 10%, for example).

Antonio Martino

Before we examine the other options, I’d like to clarify why youth unemployment doesn’t bother me a bit. Historically, unemployment has been synonymous with poverty. In 1929, to be out of work meant not to have an income and to be starving. Today, the unemployment of young people has nothing to do with poverty; it is actually a sign of relative wealth. Our young unemployed are not starving, don’t sleep under bridges, don’t walk around barefoot, naked or hungry: the majority live with their parents; they are well fed, housed, clothed and very richly entertained with PC’s, TV, cell phones and amenities of that kind; and they’re not without work because they can’t find it, but because the work that is available is not to their liking. They wouldn’t even dream to pick olives or tomatoes; they wouldn’t work as dishwashers in the kitchens of hospitals and restaurants; and they don’t even consider the option to work for, and later with, an artisan. No, those are jobs that are well below what they deserve; even offensive for someone who has a diploma (which is a legal document in Italy) in Sociology of Menopause or Psychopathology of Communication.

Therefore, to conclude, a lot of unemployed young people are not unemployed at all: they are unemployable parasites of society who dream of a lifetime workplace in a government office, with a yearly bonus and paid vacations.

Maybe I’m a sadist, but I’m not saddened at all by their condition.

The second option is to have the Euro and economic growth, reforming the welfare system to reduce government expenses to a level below 40% of GDP. The healthcare system is the first compartment which must be overhauled, for reasons which should be obvious to anyone. Its astronomical cost consists of what is accounted for as “healthcare costs” plus the amount that private individuals spend to get what the healthcare system can’t provide adequately, or in time or at all. To all that we must add 80% of the regional costs, that is: the cost of regional governments and councils, regional bureaucracies, regional consultants, regional agencies that operate at a loss, and so on. In fact, 80% of the budget of the Italian regions is healthcare related. The regions exist, for the four-fifths of their size, to manage healthcare expenditure; therefore, four-fifths of their costs consists of healthcare expenses. Roughly, then, I would venture that the government run healthcare system is costing the Italian state not less than 200 G€ (200 billion Euros).

If we could save just half of that with a radical overhaul, our budget problems would be entirely solved.

Moreover, if we consider that the system also transfers wealth from the poorer to the richer individuals and that the episodes of medical malpractice are a daily occurrence, we must conclude that such a monstrous caravanserai can’t possibly be defended.

The Italian regions.

The third possibility would be to have the welfare system and economic growth. With the Euro, however, that’s not so easy. We have climbed aboard a boat without a life-saver, that is, we locked ourselves in a prison and we threw away the key.

The founders of the Euro didn’t take into consideration that it might not work. There’s no alternative plan.

Maybe, just maybe, we should go back to Maastricht, renegotiate the treaty, remedy the Euro’s shortcomings, and guarantee the correct functioning of the monetary union. Antonio Martino, 18 luglio 2012 (I'd to thank J.J.P for editing the post.)